Aldi’s expansion to the west puts electrical retailers on notice

By Claire Reilly

Aldi is set to expand its Australian store network across the west, with the company making a sizeable investment to set up new shopfronts in South Australia and Western Australia.

Speaking to The Australian Financial Review, the managing director of Aldi Australia, Tom Daunt, said the German supermarket chain would invest more than $2.5 billion into the local store network, including $500 million to build two distribution centres in South and Western Australia.

“We’re proud of the offer we’ve been able to put out there to grocery buyers on the eastern seaboard,” he told AFR. “The benefits we bring to consumers are very established and well understood not only by our customers but by government and other agencies.

“We’d simply like to extend that offer to as many Australians as we can.

“We’ve had to reach a critical mass to afford to invest in other markets but we’ve reached that point and we’re happy to bring Aldi to Western Australia and South Australia.”

The move into the west is due to progress over the next “several years”, with Daunt confirming that the retailer would need to “acquire distribution centre facilities to support the retail operations” before setting up stores.

“We also have to get out there and acquire a pipeline of stores,” he added. “I suspect it will take some years to develop.”

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While the move will see Aldi become more competitive with supermarket giants Coles and Woolworths, the retailer’s appliance offering may bring it into significant competition with retailers in the west that play in the electrical categories, including price-competitive retailers such as Target, Kmart and Big W.

Aldi has a limited appliance offering, but does advertise a selection of products with highly competitive price points — including toasters, kettles, hand mixers, stick mixers and toaster ovens under $20, and freezers and bar fridges under $200. The retailer also offers its own house-branded capsule coffee machine — known as the Expressi range — under the $100 price point. 

On its website, Aldi Australia boasts a store network of “over 260 stores in NSW, ACT, QLD and VIC”. By comparison, Big W has 176 stores (according to Woolworths Limited’s FY2013 1H results), Kmart has 185 stores and Target and Target Country comprise a network of 301 stores (according to Wesfarmers’ FY2013 1H results).

In terms of the two big supermarket chains in Australia, Coles and Bi-Lo have 749 stores while Woolworths has 887.

After opening its first store in 2001 and now boasting more than 260 stores on the east coast alone, Aldi’s push into the west is will no doubt make the supermarket chain a force to be reckoned with — for supermarkets and electrical retailers alike.

“When Aldi stores open we have a positive downward effect on grocery prices,” said Daunt. “Even those who don’t choose to shop with us benefit because other supermarkets sharpen their pencils.”

With a range of low-priced appliances advertised for its stores, Aldi's expansion in Australia may lead to increased competition for electrical retailers.

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